VICTORIA — The week brought another episode in the ongoing debate about the correct measure of the provincial bottom line, a battle of the accountants with broader political implications.

On one side there’s Auditor General John Doyle, the independent watchdog on provincial finances, applying a by-the-book reading of public sector accounting standards.

“I don’t have any room to manoeuvre,” as Doyle told a legislature committee recently. “We will follow the rules, whatever the rules may be.”

On the other side is comptroller-general Stuart Newton, the in-house keeper of the accounts, who takes a broader perspective on the state of provincial finances.

“I feel for the auditor when he’s following a very specific set of rules to be able to come to his conclusion,” Newton told that same committee. “I still have to think of the (government) entity in the whole and the long-term comparability and usability of the financial statements as well.”

The upshot was on display this week in a report from the auditor general, spelling out in detail qualifications he had expressed earlier about the financial statements for the fiscal year ended March 31.

Bottom line: Doyle pegged the deficit for the past year at $2,360 million, about half a billion dollars larger than the $1,840 million figure certified by the comptroller.

Doyle cautioned against interpreting the difference as a matter of technicalities: “Qualifications represent more than a simple disagreement between accountants. They indicate to users of financial statements that some of the information is not auditable or could be misleading.”

Two of the qualifications that Doyle placed on the financial statements would have (if accepted by the province) increased the deficit, one would have decreased it and the other would have made no difference on the bottom line.

The first and most clear-cut is his rejection of the government’s insistence on treating the B.C. Transportation Investment Corporation, parent company for the tolled Port Mann Bridge project, as a self-supporting government entity.

“Premature,” says Doyle. The expanded Fraser River crossing is many years away from generating enough tolling revenue to break even, never mind recoup intervening years of operating losses.

He confided his concerns about the financial modelling for the multibillion-dollar project during his recent appearance before the legislature committee: “The financial models that I’ve had to date had some pretty fundamental problems with them. I probably am not prepared to expand upon that in public, but would be happy to do so in camera.”

Meantime, Doyle would classify the entity as nothing like self-supporting, thereby boosting the provincial operating deficit by $97 million.

Less persuasive, in my view, is Doyle’s proposed treatment of the credits that government makes available to petroleum producers who drill deeper (and hence more expensive) natural gas wells.

The credits can be used to reduce royalties paid to government from those same wells. Lately, with output slackening because of the glut of natural gas, the credit-holders have been banking them to claim in future years.

The auditor general argues that the credits should be booked as a liability, thereby increasing the deficit by a hefty $702 million.

The comptroller disagrees, arguing that the credits don’t represent current cash paid to producers, but rather future reductions in royalty payments to government. In testimony before the legislature committee, he offered the comparison to child tax credits, which may reduce federal income tax revenues but aren’t booked as a liability by Ottawa.

There would appear to be more room for movement on the other two concerns raised by Doyle, one involving how the province accounts for federal transfer payments on infrastructure projects, the other how it books the assets held by some government enterprises.

His treatment of the former would have reduced the deficit by $279 million, partly offsetting the above-mentioned increases. The latter would have no impact on the deficit but would mean booking an additional $1.1 billion on the provincial statement of assets. Both concerns could be addressed through changes in national accounting standards.

As for what all this means to the public, there’s no sign of any of these concerns having a negative impact on the province’s triple A credit rating.

I would also note an observation made by Bruce Ralston, the NDP finance critic and chair of the public accounts committee.

He says this is not a matter of financial coverup, but rather a dispute about accounting treatments: how various items that are already recorded in the public accounts should be interpreted in determining the bottom line.

Ralston, in general, sides with the independent auditor general. But mindful that he might find himself presiding over the Ministry of Finance if his party wins the next election, he reserves the right to consider the views of the in-house comptroller as well.

Otherwise, the biggest impact of Doyle’s findings is likely to be on the B.C. Liberal effort to put together a balanced budget on the eve of the next election. Hard enough to make the claim, without the auditor general saying the last reported bottom line was off by an additional half a billion dollars.

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